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Do Low Rates Mean You Should Refinance Your Mortgage?

by | Feb 15, 2016 | Mortgage Industry, Mortgage Rates, Refinance, Tax Credits |

refinance your mortgage

Is this the right time to refinance your mortgage?
photo credit: kDee via Can Stock Photo Inc

Mortgage rates are still at historic lows, and they are defying all predictions and expectations, by continuing to lower. Does that mean a refinance is the right thing for you right now? Low rates are just one factor that should go into your decision to refinance your mortgage. Here are a couple of other things to consider:

How much time is left on your loan? A refinance is usually done in order to lower your interest rate and, in some cases, reduce your monthly payment, but you may also be extending the period over which you are paying it off. This means that, although you will have more money leftover each month, you could end up paying more over time. Rick Kahler, for USA Todaysuggests “obtaining a new mortgage that is equal to or less than the number of years remaining on your current loan.”

How much will the actual refinance process cost you? There are closing costs associated with a refinance, just like with a new mortgage, along with things like appraisal fees. You need to take these costs into account when determining whether it’s worth it to refinance your mortage. You can use a refinance calculator, like this one, to help make this determination. Or, you can take the entire cost of the refinance and divide it by the monthly savings. The resulting number will be the number of months until your “break even” point.

One other factor, according to Time.com/money, which many refinance calculators do not take into account, is the mortgage tax deduction that many people have grown accustomed to receiving. A lower interest rate means a smaller deduction.

Of course, once you decide you want to refinance, shop around for the best rate. The interest rate is the price of the loan, so you want to find the lowest rate possible.

For the latest rates, check out lonestarfinancing.com today!

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